Bull Market or Bear Market, Jewish Charities’ Assets Growing

March 19, 2007

The Jewish philanthropic world is not worried that a downturn in U.S. stock markets so far this year will hurt investment in Jewish causes.

The economy generally has been booming since the early 1990s. And despite a market crash when the high-tech bubble burst in 2000 and after the Sept. 11 terrorist attacks, a bull market that resumed in 2003 pushed indexes such as the S&P 500 and the Dow Jones Industrials Average back to record highs earlier this year.

The boom has led to an infusion of cash into the Jewish world.

Some comes from a huge growth in personal wealth, which has allowed the likes of casino mogul Sheldon Adelson to start a foundation that is expected to pay out more than $200 million a year to Jewish causes. It has let others make landmark individual gifts to Jewish institutions such as the $100 million gift this fall from Ronald Stanton, chairman of Transammonia, Inc., to Yeshiva University.

Some of the cash influx is due to the tremendous growth in the number of private foundations. There are 10 times as many private foundations today as there were 20 years ago, the Institute for Jewish and Community Research estimates.

With some $30 billion invested in private Jewish foundations, which are required by law to pay out at least 5 percent of their assets each year, foundations now give more to the Jewish community than do federation campaigns. The private foundation world has given a huge boost to Jewish education initiatives and has spearheaded such landmark initiatives as birthright israel.

And they could give even more in coming years: Assets of major general foundations rose 2.8 percent in 2005, according to the Chronicle of Philanthropy. Though 2006 tax reports are not yet in, returns on their investments seem to have skyrocketed last year as well.

“Overall, foundations have seen real large growth,” said Ian Wilhelm, a senior writer for the Chronicle of Philanthropy who cove! rs found ations.

Jewish foundations have grown with them.

The Baltimore-based Harry and Jeanette Weinberg Foundation, for instance, grew by $100 million last year to $2.15 billion, largely due to holdings in Hawaiian real estate, according to Chief Operating Officer Rachel Monroe. The foundation has doubled its assets through investments since Harry Weinberg died in 1990.

Murray Galinson, chairman of the board of San Diego National Bank and vice chairman of the Jewish Funders Network, has his own foundation and sits on the boards of several others. He has seen foundations with which he is affiliated grow by as much as 10 percent last year.

Much of that growth is due to the bull market, but the stock market has stumbled since the start of 2007. The Dow Jones Industrials and S&P 500 have taken sharp downturns, with the steepest so far occurring Feb. 27, when the Dow dropped 3.29 percent and the S&P 3.47 percent in a single day.

After rallying a bit this week, the Dow was down 2.6 percent for the year as of market close on March 15, and the S&P was down 1.7 percent for the year.

Still, even as analysts warn that the bull market could be over, experts are not concerned that it will seriously affect Jewish giving through foundations or direct gifts.

Foundations generally are safe even when the market dips, for several reasons. For one, they ve been working in recent years to diversify their portfolios.

In the 1980s most foundations kept their money in stocks and bonds, but since then they have begun following diversified investment strategies that universities such as Harvard and Yale have used to build huge endowments.

Especially in the past several years, foundations have invested heavily in alternative investments such as hedge funds, private equity, currency trading and real estate, according to Steve Voss, principal of Ennis Knupp, a consulting firm that advises foundations on investing.

Mo! st found ations also have long-term investment strategies that can weather short-term market losses, according to Jeffrey Solomon, president of The Andrea and Charles Bronfman Philanthropies.

While short-term stock market dips create a pall, they don’t generally turn immediately into changes in grant making, he said.

Further, the sheer size of some foundations should be enough to protect them during a market downturn.

It might have a short-term effect, but the assets of foundations are continuing to grow, and think about it: If you re a large foundation of hundreds of millions of dollars, if the market loses 10 percent of its assets, a $300 million foundation will turn into a $270 million foundation. It s not going to have a serious effect, said Gary Tobin, president of the Institute for Jewish and Community Research. The assets are going to continue to grow and the amount of money coming into the Jewish community is going to continue.

Those outside the foundation world also aren t concerned by a slowing of the stock market.

Increased personal wealth has contributed to a tremendous infusion of cash into endowment funds.

The Jewish Communal Fund of New York grew by 24 percent in 2006. The fund took in 80 percent more in December 06 than it did a year earlier, according to Sue Dickman, the fund s executive vice president.

On the West Coast, the Jewish Community Endowment Fund of Greater San Francisco has grown from $300 million in 1996 to over $2 billion now, with the largest increase coming between 2005 and 2006, according to director Phyllis Cook.

Between year-end 2004 and year-end 2006, the endowment jumped from roughly $770 million to $1.8 billion, according to figures it provided to JTA.

Cook attributes most of that to supporting foundations finding themselves with assets that had steeply increased in value, and with sudden wealth from venture-capital investments in high-tech.

Personal wealth ! also has led to a serious influx of money into donor-advised funds, in which donors give money to a third party and guide the fund s allocations. These funds allocate donors money at a relatively low cost, while donors still reap the tax benefits, according to Mark Charendoff, president of the Jewish Funders Network. The JFN will convene hundreds of foundation officials March 18 at its annual conference in Atlanta.

Even if personal wealth does not continue to grow as fast as it has in recent years, the philanthropies should be fine, Charendoff said. In part it s because people today aren t waiting until they ve definitively conquered the business world to start giving back: They are giving money while still making money, which means that much of the newly acquired wealth already has been invested in charities.

Even if the market does take a hit, those running organizations don t expect a slowdown in funding anytime soon, provided that recipients of the money show results, according to Jerry Silverman, executive director of the Foundation for Jewish Camping.

His organization s budget comes from direct donors and has about doubled in the past year from its 2006 level of $4.1 million.

I strongly believe that it s just like in business today: People look at their philanthropic investments and want to see results, Silverman said.

I liken it to my favorite football team, the New England Patriots, he continued. The owners, Robert and Myra Kraft, major supporters of the Boston federation and other charities, have done a great job of filling Gillette Stadium. They have set up such a great franchise and the fans are coming.”